Private Equity in Insurance: What Independent Agencies Need to Know

• December 10, 2025

By Jarod Steed and Craig Niess

Over the past decade, the insurance brokerage industry has undergone a fundamental transformation as private equity (PE) capital has flooded the space. Today, there are approximately 45 institutional buyers actively consolidating the fragmented landscape of about 35,000 independent agencies.

For agency owners preparing for a sale, planning succession or assessing their competitive standing, it’s more important than ever to understand the forces that drive an agency’s valuation.

Why PE Targets Independent Insurance Agencies

The insurance brokerage sector offers a business model that delivers recurring revenue from annual policy renewals, maintains strong profit margins and demonstrates notable resilience during economic downturns. With thousands of independent agencies, the industry’s fragmentation further enhances its appeal by creating clear consolidation opportunities.

“At a high level, the insurance brokerage space is very defensible,” said Jeff Michael, principal at BHMS Investments. “It’s a durable business with recurring cash flows, it’s regulated and it’s fairly counter-cyclical.”

Furthermore, the sheer amount of capital seeking deployment in PE funds, currently estimated at $2.6 trillion in “dry powder,” according to S&P Global, and we can infer that there are billions of dollars of PE in the insurance industry alone that create intense competition for quality agencies. This competition has driven higher valuations, with the revenue required to be the 100th largest broker increasing from $13.8 million in 2020 to $18 million in 2024, according to Insurance Journal’s “Top 100 Insurance Property/Casualty Agencies” report. Even more dramatically, the threshold for the 10th-largest brokerage jumped $300 million over just five years. This growth is achievable only through aggressive acquisition.

4 Drivers of Agency Value

The market clearly rewards size, as evidenced by the concentration at both ends of the industry barbell: mega-agencies growing through serial acquisition, while small agencies continue to regenerate at the grassroots level.

When evaluating potential partners, PE-backed platforms assess both quantitative metrics and qualitative factors that will determine long-term success. Here are four drivers of agency value that PE platforms consider:

1) Line of business mix. Commercial lines businesses command higher premium multiples than personal lines based on defensibility and disruption risk. While consumers may eventually purchase home and auto insurance entirely through mobile apps, commercial lines clients will likely always require consultative selling, complex risk assessment and ongoing account management.

Employee benefits, group health and specialized lines, such as surety or non-standard auto, each have their own valuation dynamics. Agencies with diversified revenue across multiple product lines often receive favorable treatment, as they present less concentration risk.

2) Niche specialization. Agencies that have built deep expertise in specific industries or risk classes create particularly defensible businesses. Whether it’s hospitality, construction, healthcare or manufacturing, vertical specialization allows agencies to develop proprietary knowledge, specialized carrier relationships and pricing power that generalist competitors can’t easily replicate. This level of specialization translates directly into higher multiples.

3) Leadership and team strength. The quality, depth and tenure of an agency’s leadership team significantly impact valuation. Buyers assess whether key producers are likely to remain post-transaction, how dependent the business is on the owner and whether the management team can scale operations as the agency grows. Strong second-tier leadership that can operate independently commands premium valuations.

4) Geography and market position. Agencies in growing metropolitan markets or regions where a buyer seeks density may receive favorable treatment. Market position, whether measured by revenue rank, carrier relationships or brand recognition, also factors into valuation discussions.

People-First Philosophy

In addition to the financial engineering and spreadsheet analysis inherent in PE, successful acquirers consistently emphasize cultural fit and relationship quality above pure metrics.

“For us, it’s been a people approach, and that’s where we start, and that’s where we finish,” said Jeff Yamin from OneDigital. “If we can’t get that part of it right, it’s not going to make a lot of sense for us, or for the seller.”

OneDigital reports that over 90% of its acquisition conversations now originate from within its own organization—team members identifying agencies in their local markets that would make good partners. This organic deal flow provides built-in cultural validation and smoother integration.

Jeff Mason, CEO of Tropolis Insurance, referenced what Integrity Marketing Group founder Brian Adams calls the “campfire test,” which asks whether you could comfortably sit across a campfire from your potential partners for hours. Given that most partnerships involve ongoing equity participation and multi-year commitments, cultural alignment proves as important as financial terms.

This philosophy reveals a fundamental shift in consolidation strategy over the past decade. Agencies and platforms that have prioritized true integration, consolidating onto single agency management systems, standardizing processes, centralizing back-office functions and building unified cultures now command premium valuations. Those that haven’t integrated face costly remediation efforts or valuation discounts.

“In 2011, people weren’t thinking about integration at the forefront of their mind,” Michael said. “I would say probably six, maybe seven years ago, that dynamic changed. People are paying the price today that are continuing to try and integrate after they’ve acquired dozens, if not hundreds, of agencies.”

Integration extends beyond technology. It encompasses HR management, training programs, carrier relationships, marketing resources and administrative support. The goal is to create genuine operating leverage where the whole exceeds the sum of the parts.

For independent agencies considering acquisitions of their own, the integration imperative holds equal weight. Agencies that successfully integrate their acquisitions onto unified systems with clean data build more valuable, scalable businesses. Those that accumulate disparate “bolt-ons” without integration find themselves stuck at a valuation plateau.

Further, interest rates have profoundly impacted PE returns and, consequently, valuation dynamics.  When rates hovered near zero, cheap debt made leveraged buyouts easier to execute and financial engineering could cover operational shortcomings. At 4% rates, operational excellence and genuine integration matter far more.

“When the tide goes out, you sort of see who’s been swimming naked,” Yamin said. “That seems to be playing out in the market today.”

Practical Guidance for Agency Owners

For independent agency owners considering their options, here are five pieces of advice:  

1) Do your homework. With 45 institutional buyers in the market offering different structures, equity arrangements and integration philosophies, cutting through the noise requires deliberate effort.

“This is probably one of the most impactful decisions you will ever make,” Michael said. “You spend decades building something, you want to make sure you’re partnering with the right group.”

2) Talk to other agencies. The single best way to understand what life looks like after a transaction is speaking with agencies that have already joined a platform. “If that firm or those firms aren’t willing to provide those folks for you to talk to, then that might be all you need to know about that decision,“Yamin said.

3) Don’t rush. Artificial deadlines and pressure tactics should raise red flags. “Don’t let them rush you,” Mason advised. “Just take the time that you need, be patient. They have to be patient.”

4) Understand your value drivers. Agencies should honestly assess their position across the key value drivers: size, line of business mix, specialization, leadership depth and integration quality. Understanding where you excel and where you have gaps enables realistic expectations and better negotiations.

5) Consider all options. PE partnership represents one path among several. Internal succession, selling to employees, merging with a peer agency or remaining independent all remain viable strategies. The right choice depends on individual circumstances, goals and the specific agency’s characteristics.

Jarod Steed is business planning and valuation analyst at IA Valuations and Craig Niess is director of business planning and valuations at IA Valuations. For questions about agency valuation or exit planning, contact the IA Valuations team.  

The information provided is general in nature and shall not be construed as personal legal, tax or financial advice for your situation. Email contact@iavaluations.com to discuss your personal situation.

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